While demand for outsourcing services remains strong in the pharmaceutical industry,spending is down and further decreases are expected. Service provides are faced with increasing competition and growing pressure to differentiate.

Pharmaceutical Market Remains Strong…

The global pharmaceutical market is currently expanding at a healthy compound annual growth rate (CAGR) of 6.3% according to EvaluatePharma. In addition, global pharma R&D spending is increasing at a CAGR of 2.8%. As a result, by 2022, the research firm expects 50% of added revenues to be derived from new products currently in the R&D pipeline.1 The market for active pharmaceutical ingredients (APIs) is growing at a similar CAGR (6.5%) and will reach $225 billion in 2021, according to Mordor Intelligence.2

Not surprisingly, healthy growth rates are also predicted for the global pharmaceutical contract manufacturing and research markets. Mordor Intelligence predicts the contract manufacturing sector will expand at a CAGR of 6.4% to reach $84 billion in 20213, while Grand View Research estimates the global healthcare contract research industry will grow at greater than 6.0% annual and be valued at $45.2 billion by 20224.

But Is Changing…

While growth remains strong, the pharmaceutical industry is faced with pricing pressure and expectations for new medicines that provide measureable added value. Drug manufacturers are challenged to be first to market with highly efficacious, cost-effective and demonstrably safe products and are consequently seeking efficiencies in all aspects of their operations. Reasons for outsourcing to contract development and manufacturing organizations (CDMOs) and contract research organizations (CROs) are thus changing.

While outsourcing activities were initially driven by the desire to reduce costs, for respondents to the 2016 Nice Insight CDMO Outsourcing survey, the top five drivers for outsourcing were improving quality and efficiency, gaining competitive advantage and operational / technical expertise and reducing the risk of supply shortages. 5 In 2017, the top reason for participants in 2017 Nice Insight Contract Development and Manufacturing Survey is access to specialized technologies.6 The other top four reasons are improving quality, gaining expertise, outsourcing is seen as a strategic activity and cost.

Similarly, for respondents to the 2017 Nice Insight Preclinical and Clinical Contract Research Survey, access to specialized technologies is the main driver for partnering with research firms.7 Other top reasons include improving quality, incorporating outsourcing in their strategic plans, and gaining access to operational, subject matter and regulatory expertise.

Contract service organizations that serve as long-term partners, act as extensions of their customers’ businesses and provide comprehensive, efficient, responsive and affordable support combined with access to novel and proprietary technologies will achieve the greatest success under these conditions.

With Continued M&A Activity …

Merger and acquisition (M&A) activity has occurred at a healthy pace in the pharmaceutical industry in recent years, including in the contract services sector. A total of 76 transactions involving service organizations were announced or completed in 2016, according to Capstone Partners, with sellers achieving high valuations with an average EBITDA multiple of 113.2x.8 Notably, nearly three quarters of the deals were made by strategic buyers. In the CDMO segment, Capstone reports that emerging and small pharma companies, which account for a growing percentage of pipeline candidates, require support across the full pharma development cycle from discovery through commercialization, which is driving M&A activity.8 The number of US CDMOs acquired in 2016 totaled 14.

The increasing complexity of clinical trials is driving demand for sophisticated CRO partners that have a broad range of advanced capabilities, according to Capstone.8 This need is a key driver of M&A activity in the CRO space.

CROs and CDMOs, as well as diversified testing, inspection and certification companies and private equity firms have also been busy acquiring analytical testing laboratories in order to meet the growing demand for cost-effective testing in the face of increasing regulatory requirements and the need to rapidly evaluate large numbers of pipeline candidates, according to Capstone.8

And Decreased Spending

Despite the healthy state of the market, the Nice Insight survey results for both the CDMO and CDMO sectors indicate a measurable decrease in spending by pharmaceutical companies on outsourcing activities.

Notably, the percentage of respondents to the 20165 and 20176 Nice Insight CDMO Outsourcing surveys with annual outsourcing expenditures of $50 million or more dropped from 71% to 56%, respectively. In addition, more respondents to the 2017 survey expect their companies to decrease (52%) rather than increase (39%) spending on contract development and manufacturing services over the next five years5 compared to 75% and 4%, respectively, in 20166.

A decrease in spending was also noted in the CRO sector; the number of drug manufacturers spending more than $50 million/year on contract research services dropped noticeably from 56% in 20169 to 47% in 20177, according to the Nice Insight CRO surveys. Also similarly, in 2016 nearly 75% of respondents expected spending on contract research services to increase9, while in 2017 that number was just 40%, with 50% predicting a decline in spending over the next five years7.

The reduced spending matches well the significant drop in the number of new drugs approved by FDA in 2016 – down from 41 in 201410 and 45 in 201511 to just 19 in 201612 as of November 29, 2016. On a positive note, around half of the respondents to the 2017 Nice Insight CDMO (55%)6 and CRO (48%)5 Outsourcing surveys expect their companies the number of CDMOs they partner with to increase.

Overall, however, the high level of M&A activity and the results obtained for the Nice Insight surveys suggest that competition in the CDMO and CRO marketplaces appears to be tightening, making it increasingly important for outsourcing partners to meet the quality, reliability, timeliness and other expectations of sponsor firms looking to outsource research, development and manufacturing activities.

BUT… Equipment spending Is Up!

Although they are decreasing spending on outsourcing, pharmaceutical companies appear to continue spending on equipment. Over one-third of respondents (38%) to the 2017 Nice Insight Pharmaceutical Equipment Survey have equipment budgets that exceed $100 million, a remarkable increase from 2016.13 In addition, 73% of respondents project budget increases in the coming years. A desire to increase productivity, lower costs, shorten the development timeline and access specialized technologies is driving the increased investment in equipment. The budget increases in 2017 may also indicate growing investments by small and emerging pharma companies to expand their in-house manufacturing capabilities.

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Single-use equipment may be strategically adopted by biopharmaceutical manufacturers as a means by which to accelerate time to market, thereby serving patients more effectively and gaining a greater return on investment. Adoption of single-use equipment represents a shift in the responsibilities between supplier and end-user with respect to managing critical quality attributes.

Among these quality attributes are extractables/leachables, sterility assurance, integrity/leak assurance, and particulate load. Regulators across the globe have taken various approaches to lending guidance, either maintaining that today’s regulations and guidance are fully applicable to any modality of manufacturing (multi- or single-use), or deciding to embark on guidance intended to coalesce todays best practices.

Relative to multi-use equipment, a large fraction of this responsibility shifts to the suppliers. On the other hand, the end-user still retains full accountability for assuring that the single-use equipment is suitable for use and is being appropriately managed from a quality perspective. This shift in responsibility and the attendant regulatory challenges may cause hesitation on the part of the end-user as one works through development of control strategies that, by their nature, include an important element of reliance on the supplier’s quality management.

GE Healthcare views the current state of the biopharmaceutical manufacturing industry as an opportunity to provide insights that delineate the differences between multi- and single-use equipment. In addition, sharing best practices of how supplier and end-user responsibilities must evolve are critical to ensure effective quality management of single-use equipment for biopharmaceutical manufacturing.

A centralized integrated IT infrastructure streamlines user account maintenance and simplifies user access. Computer policy settings are easily administered to the technical staff and the same account credentials are used on all equipment.

When cGMP data is stored and accessible from a central location, report creation, data trending and evaluation of batch run data is easier compared with if data is stored in multiple locations. An integrated automation solution will also improve process alarm management through remote monitoring, SMS text message notifications and a single workstation view of the entire factory.

Redundancy can be applied to critical components to ensure uninterrupted operation in the event of a hardware failure, for example, a failure in an interface terminal. Workstations are interchangeable for additional flexibility.

It is critical to design and plan for automation integration early in the facility design phase. The integration details for all equipment should be thoroughly specified to avoid redesign later, sufficient time should be allocated for equipment installation and wiring between buildings and rooms, and extra time should be planned for change control. It is also helpful to carefully plan integration activities in discrete elements that can be achieved during limited facility downtime.

In a globally competitive marketplace, tangible benefits of a fully integrated automation solution are no longer a nice to have – but a business requirement.

Would you pay $93,000 USD to extend your life by four months and would you relocate to one of the handful of treatment centers in the US for that therapy? Questions like this continue to propagate. Innovative and effective cell therapy treatments are advancing in the R&D pipeline, but costs and logistical challenges have been limiting the commercial success of the select therapies that have been approved. The considerations on the road to commercialization for cell therapy take on a higher level of complexity than those for biopharmaceuticals. For example, cold chain logistics moves from refrigerated cases of finished product handled by a distributor to shipping individual cryogenic units of sale. Additionally, new considerations come into play like administration through a medical device or a pre-conditioning treatment that are as much part of the process as the operations in a controlled manufacturing facility.

Some companies are betting on autologous therapies as the quickest and safest route. These therapies challenge us as an industry to deliver personalized medicine in a reliable and repeatable way. While the immediate goal might be successfully completing clinical trials, developing the process for scale-up and automation early on is critical to future successes. Removing operator variability by automating manipulations is one consideration. This can be a simple jig or the process could utilize a fixed bed culture technology that has an existing scale up/automation solution like a NuncTM Cell FactoryTM or Miltenyi Biotec Prodigy®. Developing the process to use closed systems can reduce the clean room space required, as well as the cross contamination risk. Gaining a deeper understanding of culture needs and how to meet those needs without a conventional incubator can also help the commercialization. Moisture loss concerns through vent filters and CO2 control have kept several processes locked into manual operations since the culture must be loaded into a reach-in style incubator.

During the development of the process for scale up and automation, logistics need to be considered. A Fenwal AmicusTM collects and processes the donation so that the desired fraction can be shipped frozen with a significantly longer allowable storage time versus a refrigerated whole blood donation. As those donations arrive at the manufacturing facility, the management of what will become individual lots needs to be established. Barcode readers have been standard for a number of years and workarounds have been identified for frost over issues; however, cryogenic capable RFIDs can provide a simpler solution.

While autologous therapies provide a straightforward means of patient safety, specifically addressing graft versus host disease, researchers have developed allogeneic cell-based therapies that sufficiently address the safety concerns. Allogeneic therapies relieve some of the logistical complexity as a lot can provide therapy to many patients. Although donation logistics can be complex if the number of cell expansions are limited, requiring new donor material for every batch. Induced pluripotent stem cells (iPSCs) have the potential to allow for a traditional cell banking approach on human stem cell based therapies. Some allogeneic therapies take a different approach and utilize bacteria for cell therapies. One of the common commercialization considerations for all types of allogeneic therapies is the development of the culture to use

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One technology that caught our eye at The Medicine Maker in 2016 was augmented reality (AR) and virtual reality (VR). Most will admit that the technologies are “cool”, but at the same time there is a general feeling that the technologies are gimmicks that will see little use outside of the gaming industry or marketing campaigns. I actually thought the same thing until I researched the technology a little further….

Healthcare is one of the few sectors that has been using VR and AR for many years in very practical and inspiring applications. For example, VR has been used to provide patient therapies for pain reduction, post-traumatic stress syndrome, phobias, and even for teaching people to walk again. VR and AR are also being explored to help with training, with neurosurgeons at Duke University in North Carolina experimenting with the use of AR in delicate brain surgery.

The technologies are also making their way into pharmaceuticals. For example, Jonas Boström a drug designer based in the Department of Medicinal Chemistry at AstraZeneca in Sweden, has developed Molecular Rift – a VR environment where users can interact with molecules through gestures. Boström describes it as “the next generation of molecular visualization”. You can read more about his work on our website (https://themedicinemaker.com/issues/1016/entering-molecules/).

VR could also have a place in manufacturing. Last year, I spoke with Angelo Stracquatanio from Apprentice Field Suite to learn about how Google Glass inspired hands-free access to information for process engineers (https://themedicinemaker.com/issues/1016/harnessing-augmented-reality/). Basically, an AR headset is used to help with training, paperless procedures, and even safety and data collection; for example, an engineer wearing the headset can look at equipment and see information about it. The company launched at Interphex in 2015 – and was a hit. This application is actually very simple, but when you implement it on a practical level it can really change the way people work.

I’ve also been able to try out a VR tour of GE Healthcare’s KUBio. Wearing a headset, I could walk around a facility and even look inside equipment. It was definitely fun to try and also has a genuine use. Afterall, a facility can be designed on paper but it’s hard to know what it really feels like until you walk around it. I’ve also spoken with Pall’s Ian Sellick about this topic (https://themedicinemaker.com/issues/1016/virtual-facility-design/) – Pall has collaborated with a company called OUAT! to design a virtual space for users to build a laboratory or a whole facility. Users can set the dimensions and then look at where the utilities go and how equipment might be placed. You can do the same thing with engineering or architectural modeling programs, but the advantage with VR is that you can walk around it before building it.

VR is also useful when it comes to designing manufacturing equipment. Bausch+Ströbel, a supplier of pharmaceutical packaging machines, created a “Virtual Reality Center” in 2011 – VR is used in a variety of ways including virtual mock-up studies, design reviews, safety studies, ergonomic studies, failure mode effects analysis, training, machine redesign assessments, computer-aided engineering and air flow visualization. According to the company, VR saves a lot of time in project work and also allows customers to get involved in early project planning. You can read more about the project on our website (https://themedicinemaker.com/issues/1016/the-machine-maker/).

Overall, it seems like the use of AR and VR in pharma could be significantly more than just a gimmick – and I’ll be watching excitedly to see how the field evolves.

The Medicine Maker covers a variety of emerging technologies and trends in the pharma industry. Read more or sign up for a free subscription at: https://themedicinemaker.com/login/

A lot has been written about the benefits of using modular construction techniques in the Pharmaceutical industry. However, an area that is frequently not addressed is the risk, identifying and analyzing the risks that are present when using this approach. All of the risks can be effectively mitigated but they cannot be overlooked if the project is going to be successful.

Most projects will incorporate some combination of modular and constructed-in-place elements. The interface between the two types of elements must be coordinated very precisely in advance to ensure everything aligns. If rework of the coordinated/constructed elements is required once the modules arrive on site, then there will be reduced cost and schedule impacts from using a modular approach. Very careful coordination with fierce attention to the details can prevent this situation.

Modules must be constructed with the correct tolerances to allow integration into the larger project. Fractions of an inch do matter. Plumb, square, and level are just as critical. Module fabrication should be done by a company with a proven track record and successful experience in this area. Careful coordination of the interface details will not matter if fabrication tolerances are not followed.

Transportation of some modular elements like walls and ceiling do not pose a major concern unlike super skids and modularized building sections that can potentially be challenging. While the intent is to use modules that are as large as possible, shipping dimensions for the modules must be coordinated with the various requirements of each state the modules will travel through. Once the modules arrive at the project, the site logistics are just as important. Complete logistics plans for how the modules will arrive on site, be staged, and moved into and through the structure should be finalized well before the modules arrive. Delays and lack of coordination during this portion of the effort may result in additional exposure of the modules to weather risking damage to sensitive components, congestion on the project site, and an inability to move the modules to their final location.

All of the above risks can effectively be managed and do not offset the usually considerable benefits of modularization. Not addressing them can certainly impact both the cost and schedule benefits of modularization.

I’ve been writing about the pharmaceutical industry for close to a decade now. Part of what I love most about my current role is being able to report on a wide variety of topics and issues relevant to pharma, from ways to improve manufacturing efficiencies, to business trends, to groundbreaking research. Over the years, I’ve had the opportunity to speak with many truly inspirational and brilliant individuals. It makes me wish I had studied science rather than journalism at university….

I have been asked to write two blogs for this website. However, there are so many advances and changes happening in pharma at the moment that it is incredibly difficult to narrow things down to just two topics! Therefore, for this first blog I’d like to highlight a selection of key trends and advances in the industry that we have tackled in The Medicine Maker (https://themedicinemaker.com/) in recent months.

Political discord

When talking about current industry trends it’s impossible to overlook current global politics. Some of the biggest discussion points in the industry right now relate to the potential impact of “Brexit” and the election of a new US president. It’s not yet known exactly how these events will impact pharma – as well as other global industries – but it seems unlikely that it will simply be business as normal. In terms of Brexit, trade disruption is likely, as well as big changes for the European Medicines Agency, which is currently located in London. As for the US, President Trump’s actions are unpredictable, but the pharma industry has definitely been on the receiving end of his comments and speeches. He has also vowed to bring down drug prices.

In our February 2017 issue (see https://themedicinemaker.com/), George A Chressanthis, from Axtria, tries to predict what policy actions Trump is most likely to take and their potential impact on pharma. Policy actions on intellectual property protection and tax/financial reforms could be positive for pharma, whereas policies on drug pricing, labor immigration and international trade, are likely to have a more negative impact.

Biosimilars

The US finally approved the country’s first biosimilar in 2015. Biosimilars, of course, have been available in Europe for many years, but the opening of the US market was a crucial moment – and 2016 has ended with a long list of products under regulatory review. According to Eva McLellan and Martyn Smith, who contributed to the October issue of The Medicine Maker (https://themedicinemaker.com/issues/0916/bluff-or-serious-biosimilar-bet/), biosimilars are a hot topic for the industry because their impact extends across all phases of a biopharmaceutical product’s lifecycle – the issue of biosimilars is often raised in cell line development, manufacturing, analytical characterization and commercialization.

At the moment, the biosimilars industry is still finding its feet. Some early leaders have surged ahead, but the game could change – McLellan and Smith emphasized that the next decade will be a fascinating one to watch in terms of market dynamics. In the January issue of The Medicine Maker, Catherine Godrecka-Bareau (https://themedicinemaker.com/issues/0117/biosimilars-come-fly-with-me/) also argued that there is room for improvement in the biosimilars model; in particular, she explains that biosimilars companies could learn a thing or two from the airliner industry in terms of de-risking, optimizing costs and maximizing sales.

New treatments

Up until a few years ago, it was common to hear the media criticizing pharma for its “innovation drought”. The lack of innovation was attributed to a number of reasons, including the rising costs of research and development, and the economic crisis. Today, however, we are seeing continued successes in immuno-oncology and growing excitement around checkpoint inhibitors. There is also the rise of cell therapies and gene therapies. In January, we published a roundtable article (https://themedicinemaker.com/issues/0117/revelations-and-resolutions/) featuring Markus Thunecke (Catenion), Christa Myers (CRB), John Talley (Euclises Pharmaceuticals) and Eva McLellan (Roche) that I believe really showcases the fact that the future of medicines is bright. Siu Ping Lam, Director of the Licensing Division at the UK’s MHRA, also added: “Personally, I think 2016 has been a very exciting and busy year. A great number of new medicinal products have been authorized and the pharmaceutical industry is predicting that more new active substances are coming to fruition in 2017 and beyond.”

New technologies

Increasing innovation is also being seen in terms of new technologies that help improve the manufacture of drugs. A big focus for The Medicine Maker is on enabling techniques, technologies and processes that facilitate drug development and manufacturing. At the moment, “continuous manufacturing” and “flexible manufacturing” are key buzz words, with a number of new equipment launches being seen during 2016. Interesting advances are also being seen in formulation technologies, particularly in terms of overcoming API solubility challenges.

Every December, The Medicine Maker publishes its Innovation Awards (https://themedicinemaker.com/issues/1116/innovation-returns/). The Innovation Awards recognize the most exciting drug development and manufacturing technologies released over the year – with the overall winner for 2016 being MilliporeSigma’s Centinel technology. A variety of different technologies were highlighted in 2016 – and I think it showcases that the entire pharma industry, both manufacturers and vendors, is packed with innovation right now.

The Medicine Maker covers a variety of emerging technologies and trends in the pharma industry. Read more or sign up for a free subscription at: https://themedicinemaker.com/login/

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About INTERPHEX

INTERPHEX, sponsored by PDA (Parenteral Drug Association), is the single source for complete biopharmaceutical manufacturing solutions to safely and cost effectively process all dosage forms for life-enhancing drugs. It brings over 10,000 global pharmaceutical and biotechnology professionals together with 625+ suppliers through a unique combination of exhibition, education, workshops, partnering opportunities, and networking events. Learn More About INTERPHEX